The inquiry found evidence of children being left destitute and homeless, without state support, and forced to rely on food parcels.

Among numerous case studies, the report cites the example of a mother who slept on the floor of a mosque with her six-year-old and three-year-old for five months last year, surviving on handouts from people attending the mosque, until her application for asylum support was accepted.

"Parents told us they went without food to buy basic items for their family, and for their children … We were presented with evidence of the increased maternal and infant death rates amongst pregnant women in the asylum system, caused by poverty, problems accessing care and social isolation," said the former children's minister, Sarah Teather, who led the inquiry into asylum support for children and young people.

"Woeful levels of support for asylum seekers are pushing children into severe poverty and are far below what they need to have a decent life. The evidence we have heard is shocking and appalling. It is an affront to this country's proud tradition of giving sanctuary to those fleeing danger and violence."

Those on the lowest rate of support receive their allowance on a pre-paid card and do not receive any cash payments, which means they are unable to use the bus to get to school or to the doctors, or buy milk from a corner shop (because the card can only be used in designated shops). The cross-party inquiry condemned the system as indefensible. The panel also concluded that there was "no evidence to suggest that making things more difficult for families will make them more likely to leave the UK or discourage anyone from coming here".

Although no official data is available, the Children's Society estimates there are about 10,000 children surviving on basic asylum support – most of their parents are awaiting a decision on their refugee status. About 800 children whose parents have been refused asylum but are unable to return to their home country are living on the even more basic, non-cash support system known as Section 4.

"It would be hard to argue that is humane," Teather said. "Leaving children and their families with no money to catch a bus, make a phone call or buy basic goods seems senseless.

"The strain described by families who endure this system of support, but who are unable to return home, is not something this cross-party panel think is defensible."

The inquiry concluded that Section 4 should be abolished and replaced with a cash-based system, and recommended that even those families who have been refused asylum should be given a higher rate of support until they are able to leave the country.

The inquiry was very critical of the frequency with which families are forced to move around the country, at the whim of the asylum-support system. It cited the case of a mother and her four-year-old daughter who were forced to move 11 times during their asylum claim. "What most concerned the panel was the host of problems encountered by children and families in the asylum-support system who are moved with no regard to their education, relationships, health or home life," the report concluded.

A UK Border Agency spokesperson said the report's findings would be considered carefully.

"No one need face destitution if they comply with the law and the decisions of the courts and go home when required to do so. If failed asylum seekers cannot return home through no fault of their own, we will provide support to ensure they are not destitute, including housing and an allowance for living expenses."